Over the past month or so, lenders have been reducing their fixed rates in an effort to stimulate the purchase market, which one broker has described as “stagnant” — a figure backed up by data from the Office for National Statistics, which showed UK residential property transactions in August were 16% lower than the same month last year.
Experts have said one major contributor to the lack of activity in the property market is people waiting for house prices to fall further, but are divided on whether this is a wise move. So with many prospective buyers gambling on further house price falls, will fortune favour the patient — or the bold?
According to Graham Cox, founder of the Bristol-based broker, Self Employed Mortgage Hub, the answer for prospective buyers is simple, and that’s sit tight: “Unless you really have to, there’s very little incentive to buy now when it’s almost certain that property prices and possibly mortgage rates will be lower in six months’ time. Property values right now are falling sharply in my opinion.”
Stephen Perkins, managing director at Norwich-based Yellow Brick Mortgages, broadly agreed: “As more properties pile up on the portals gathering dust, in what is a stagnant market, vendors will have to further reduce their asking prices to compete for buyers. Many buyers at present see mortgage rates and house prices as too high and feel that both will hopefully fall over the next 12 months and so are sitting on their hands. So perhaps fortune will favour the patient.”
But Peter Stamford, director at Alston-based Moor Mortgages, believes the exact opposite is the case: “I have a friend who waited in 2016 but the time wasn’t right with his job. Then he waited again in 2018 because the time wasn’t right with Brexit coming up. Then he waited in 2020 because the time wasn’t right with Covid. He is currently waiting because the time isn’t right with interest rates. If he had moved in 2016, he would have saved thousands and thousands in rent and have a good amount of equity in his property. Fortune favours the bold.”
Jack Tutton, director at SJ Mortgages, says he is seeing a lot of buyers holding off but that there are no guarantees things will work out in their favour: “The property market has swung from a strong sellers’ market where people were achieving offers well over the asking price to the complete opposite in the space of 18 months. We are seeing a lot of prospective buyers holding off as they believe that they will get a better deal by waiting for both house prices and interest rates to fall. The issue with this tactic, as we saw when mortgage rates increased sharply after the mini-Budget last year, is you cannot predict the future and you cannot ensure that you will get a better deal.”
For Darryl Dhoffer, director at Bedford-based broker, The Mortgage Expert, people should be neither bold nor patient, but instead buy when the time is right for them: “People need to look at properties as their homes and not short-term investments, and need to act now if the time is right for them. Historically, time in the property market is better than trying to time it.”
Dhoffer’s views were shared by Steven Hargreaves, mortgage and protection adviser at The Mortgage Co: “Only hindsight will tell you when is the best time to buy or sell. Since time immemorial economists have guestimated the direction of house prices and have been wrong as much as right.”